Hanoman v Southwark London Borough Council
| Jurisdiction | England & Wales |
| Judge | Lady Justice Arden,Lord Justice Jacob,Master of the Rolls |
| Judgment Date | 12 June 2008 |
| Neutral Citation | [2008] EWCA Civ 624 |
| Date | 12 June 2008 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: B2/2007/0584 & 0584(Y) |
[2008] EWCA Civ 624
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
The Mayor's and City of London County Court
HH JUDGE SIMPSON
Royal Courts of Justice
Strand, London, WC2A 2LL
Master of The Rolls
Lady Justice Arden and
Lord Justice Jacob
Case No: B2/2007/0584 & 0584(Y)
Mr Dominic Preston (instructed by Messrs Glazer Delmar) for the Appellant
Mr Christopher Heather (instructed by LB of Southwark Legal Services Dept.) for the Respondent
Hearing dates : 20–21 May 2008
Introduction
On 27 February 2007, HHJ Simpson, sitting at the Mayor's and City of London County Court, dismissed proceedings brought by the appellant, Mr Hanoman, against the respondent, the London Borough of Southwark (“Southwark”). The claim in the action includes a claim for damages arising out of the exercise by Mr Hanoman of a right to acquire a lease pursuant to the exercise of his “right to buy” his home under Part V the Housing Act 1985 (“the 1985 Act”). There was a dispute about whether the price fell to be reduced by reference to housing benefit used to pay off the rent in like manner to the reduction he would have received if he had paid rent out of his own monies. The judge ruled against Mr Hanoman on this. Before this court, Southwark for the first time raise a jurisdictional issue: it relies on a decision of this court for the proposition that the county court had no jurisdiction to grant relief in these proceedings once the lease was executed. Mr Hanoman had, however, anticipated this argument and sought to plead a collateral contract between himself and Southwark, which he argues obviates the perceived jurisdictional problem. At the heart of this appeal, therefore, there are important issues about whether the county court had jurisdiction to adjudicate on the dispute after the lease had been executed (“the jurisdiction point”), and about whether certain provisions of Part V, which enable the price payable on exercise of the right to buy to be reduced, if there has been delay by the landlord, by reference to rent paid during the period of delay, apply also to housing benefit paid in that period (“the housing benefit point”). Mr Hanoman also failed to persuade the judge that he had a good claim for breach of a collateral contract, and he seeks to appeal against the judge's conclusions on that. A summary of my conclusions appears at [27] below.
It will be necessary to look at some of the provisions of Part V in detail, but I start with an overview.
Overview of the relevant statutory provisions regarding the right to buy
The right to buy contained in Pt V of the Housing Act 1985 entitles secure tenants to purchase their homes from their local authority landlords at heavily discounted prices. The provisions deal with the acquisition of houses and flats but I limit this overview to flats. If the tenant is living in a flat, he can require the local authority to grant him a long lease of the flat. This is usually for 125 years at a rent not exceeding £10 per annum. Detailed provisions set out in schedule 6 to the 1985 Act govern the terms of the lease. The tenant must have occupied the flat for more than five years (previously this period was three years): s 119. The amount of the discount to which he is entitled is calculated by reference to the length of his period of residence. The right to buy cannot be exercised where, for example, the tenant is obliged to give up possession of the dwelling house in pursuance of an order of the court (s 121).
If the tenant wishes to exercise his right to buy, he must give written notice to the landlord (s 122). The landlord usually has four weeks in which to serve a written notice in reply (s 124). That notice must either admit the tenant's right to buy or deny it, stating the reasons why, in the opinion of the landlord, the tenant does not have the right to buy.
If the right to buy is established, the landlord must serve a second notice on the tenant in accordance with s 125 of the 1985 Act. In this case, the landlord had 12 weeks in which to serve that notice. The tenant must serve a further notice on the landlord within 12 weeks of receiving the landlord's notice. He must state whether he intends to pursue his claim to exercise the right to buy or whether he intends to withdraw it (s 125D).
The price payable for the flat is its value less the discount to which the purchaser is entitled (s 126). The value is the price it would realise if sold in the open market calculated in accordance with s 127. The discount allowable to a tenant seeking to exercise the right to buy is dependent on the length of time the tenant has been a public sector tenant (s 129).
If the flat is sold within five years after the grant of the lease, the tenant must repay all or part of the premium (s 155). In Mr Hanoman's case the relevant period was three years but this has now been extended to five years. I will call the relevant period “the trigger period”. The liability to repay is a charge secured on the premises.
Once the price is fixed and the terms of the lease are settled, the landlord is under a duty to grant the lease (s 138(1)). If the tenant fails to complete, the landlord can serve a notice on the tenant requiring him to complete within a specified period (s 140). If the tenant fails to respond to this notice, the landlord may serve a second notice. The right to buy will be deemed to be withdrawn if the tenant fails to comply with that notice (s 141).
The tenant likewise has power to serve a notice of delay on the landlord. By virtue of s 153A(5), where the landlord has failed to reply to the initial notice in the time allowed, the tenant may serve an “operative notice of delay”. The effect of this notice is that the landlord must deduct from the purchase price an amount based on the rent paid during the period of the delay (s 153B). In addition, the trigger period is shortened by the period for which such rent was payable.
The Leasehold Reform, Housing and Urban Development Act 1993 (“the 1993 Act”) introduced a right to acquire on rent to mortgage terms. This enables a tenant to make an initial payment and to receive an interest-free loan for the remainder of the purchase price. This loan is secured by a mortgage over the premises. The right to acquire on rent or mortgage terms cannot be exercised where the tenant was entitled to housing benefit during the 12 months preceding the claim (s 143A).
The county court has jurisdiction to determine any question arising under Part V of the 1985 Act: s 181 of the 1985 Act.
Background
The details of the early history do not matter. Mr Hanoman had been a secure tenant of Southwark from about July 1977 of a one bedroom flat at 86 Northfield House, Peckham Park Road London, SE18 (“the Property”). At all material times, Mr Hanoman was in receipt of housing benefit and this meant that the rent was in whole or substantial part paid out of housing benefit and not by him personally. Mr Hanoman was notified that he was entitled to the right to buy a lease of his flat, which in due course he decided to exercise. At various points, the London Borough of Greenwich acted as agent for Southwark but in the interests of simplicity I will ignore Greenwich's interventions and state the facts as if Southwark had at all times acted on its own behalf.
The premium payable by Mr Hanoman if he wished to exercise his right to take a lease was £ 17,000. This represented the then market value of the flat of £55,000 less a discount of £38,000. By 2003, the value of the lease had increased to £95,000 and is thought to be worth some £190,000 at the date of this appeal. There is no argument about the size of the discount.
Southwark did not initially accept that Mr Hanoman had duly exercised his right to buy and that dispute led to litigation, in which Peter Smith J ( [2005] 1 All ER 795) on appeal from the Central London County Court held that his notice was valid and that Southwark was under a duty to deal with the application.
Mr Hanoman lodged several notices of delay. He alleged that the premium payable on grant of the lease should be reduced to nil under ss 153A(5) and 153B of the 1985 Act. There was also a dispute about whether the lease would include a shed, but Mr Hanoman no longer pursues that matter.
Mr Hanoman wanted to proceed to completion provided that he could reach a satisfactory position with Southwark about taking any dispute to the county court thereafter. On 16 May 2005, he wrote to Southwark as follows:
“Given that this protracted matter has been on-going for nearly six years, I am understandably eager to bring it to a belated conclusion. With this in mind, this is to formally suggest that I will go ahead with the purchase despite my strong reservations on the Sections 153A/B and 184 [notice] issues. To this end, I will now attempt to negotiate loans to cover the purchase price.
However, this is on the premise that I am reserving the right to subsequently apply to a Court for a declaration on the validity and effect of the said notices.
If we are in accord, the Solicitor who will act for me on the conveyance is:
Ms N. P. Hanoman, 9 Fromondes Rd, Cheam, Surrey, SM3 8QP.”
On 17 May 2005, Mr Hanoman wrote a reminder. On 17 May 2005, Mr Oliver Cousland on behalf of Southwark simply replied as follows:
“We look forward to hear further from your nominated solicitor regarding a suitable completion in due course.”
However, on 20 May 2005....
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